DeepSeek: Rewriting AI?
Week of January 27th, 2025
Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!
We’ve scoured the vast landscape of the web to bring you a comprehensive roundup of the industry’s top news articles, all in one convenient place. We keep you ahead of the game and in the know about all things related to the vibrant world of investments
STARTUPS
ROUNDS AND UNICORNS
The Week’s Biggest Funding Rounds: Anthropic Leads Slow, Slow Week (Crunchbase, 5 minute read)
Anthropic (AI): Anthropic, a rival to ChatGPT, raised $1 billion from Google, continuing a strong investment streak. Google’s investment follows a $2 billion funding round in October 2023, and the company is reportedly in talks to raise $2 billion more at a $60 billion valuation. Anthropic was last valued at $18.5 billion in February 2024
Highnote (Fintech): Highnote, a San Francisco-based fintech platform for virtual and physical card payments, raised $90 million in Series B funding led by Adams Street Partners, bringing its valuation to $750 million. Founded in 2020, the company has raised over $145 million
Render (Cloud Infrastructure): Render, a cloud platform simplifying development for companies, raised $80 million in Series C funding led by Georgian. Founded in 2018, it has raised nearly $157 million
ShopMy (Marketing): ShopMy, a marketing startup helping creators build brand relationships, raised $77.5 million in Series B funding led by Bain Capital Ventures and Bessemer Venture Partners. Founded in 2020, it has raised $97 million
Fundraise Up (Nonprofit): Fundraise Up, a nonprofit fundraising platform that uses AI to increase donations, raised $70 million led by Summit Partners. Founded in 2017, it has raised $82 million
INDUSTRY
Why 2025 Looks Like A Big Year For Venture Capital (Forbes, 5 minute read)
Startup funding in 2025 is off to a strong start, with companies like Synthesia raising $180 million and Collate achieving a $100 million valuation. Analysts expect 2025 to surpass 2022 in VC investment activity. VC activity is likely to focus on late-stage startups and high-potential industries like AI and cybersecurity. Economic trends, including inflation targets, GDP growth, and low unemployment, are expected to boost the venture landscape, while IPOs from companies such as Chime and Hopper could accelerate exits
AI remains the hottest investment sector, with foundational models and developer tools drawing significant interest, alongside growth in cybersecurity startups
Late-stage startups are expected to dominate funding in 2025, with more IPOs returning capital to investors and encouraging liquidity for newer ventures
Regulatory shifts from Trump's reelection may favor PE and crypto industries, potentially increasing investment activity in these areas
What is DeepSeek, the Chinese AI startup that shook the tech world? (CNN, 5 minute read)
DeepSeek R1, a new Chinese AI model developed by startup DeepSeek, has disrupted the tech industry by delivering capabilities comparable to advanced US models like GPT-4 and Google Gemini at a fraction of the cost. DeepSeek spent just $5.6 million developing R1, compared to the $65 billion Meta plans to spend on AI this year or the trillions in investment anticipated by OpenAI’s CEO. This breakthrough challenges assumptions about the cost and accessibility of AI innovation, especially as DeepSeek achieved this with restricted access to high-power AI chips due to US export bans
Founded in late 2023 by hedge fund manager Liang Wenfeng, DeepSeek gained rapid attention after revealing R1, which has been downloaded nearly 2 million times and surpassed ChatGPT on app store charts
The model is open-source, enabling other companies to test and build upon it
Stock prices for major AI-focused firms reacted sharply, with Nvidia (down 12% in premarket trading), Meta, Alphabet, and others experiencing significant declines
However, skepticism persists. DeepSeek hasn’t disclosed training costs, leaving room for speculation about its true expenses
Seed Funding Rose In These Spaces (Crunchbase, 2 minute read)
Seed funding trends reveal key startup sectors likely to secure significant follow-on rounds, with robotics, accounting software, legal tech, and AI leading the way in 2024. Robotics saw a massive 77% rise in seed funding, driven by innovations in household automation and AI integration. Accounting and bookkeeping startups received $143 million in seed investments, while Legal tech remained resilient, with U.S. startups raising $93 million, driven by AI solutions for regulatory compliance and patent law
AI dominated overall seed funding, attracting $7.6 billion globally
The robotics sector experienced a surge in seed funding, reaching over $1 billion, with significant contributions from companies integrating AI to advance automation in household and industrial tasks
Recent trends emphasize reducing human involvement through automation, moving away from human-reliant consumer apps like Uber and Airbnb that defined the 2010s
Seed Rounds Got Larger Through The Downturn. Why Is That? (Crunchbase, 3 minute read)
Seed funding has shown resilience during the startup funding downturn, with larger seed rounds becoming more common since 2021. Although overall seed funding decreased to $13.2 billion in 2024 from its 2022 peak of $19 billion, it outperformed early- and late-stage funding, which fell by approximately 50%. Investors are increasingly turning to seed funding for its lower risk and potential for growth in the next funding cycle. However, securing seed investments has become more challenging, with founders needing substantial traction
Seed rounds exceeding $5 million have gained a larger share of investment dollars since 2022, signaling a shift toward bigger commitments at the seed stage
As Series A and B funding became harder to secure, many startups raised follow-on seed rounds, extending the seed stage as an investment category
Founders face tougher requirements to raise seed funding, with institutional seed rounds ($2.5-$3 million) requiring significant traction and disciplined valuation expectations
Here’s what President Trump’s initial actions could mean for VCs (Pitchbook, 2 minute read)
President Trump’s recent executive actions are reshaping the VC landscape, particularly in energy, AI, and cryptocurrency. His pro-business policies, characterized by deregulation and a focus on traditional energy sources, create new opportunities and challenges for startups. For instance, dismantling Biden-era climate and energy directives, such as carbon neutrality targets and methane caps, is expected to boost fossil fuel production
Meanwhile, Trump’s removal of AI safety provisions is paving the way for accelerated growth in AI infrastructure, especially for startups supporting large-scale deployments
Similarly, his appointment of crypto-friendly regulators signals support for blockchain and Bitcoin mining ventures, though energy-intensive sectors like crypto and AI could strain the nation’s power grid, indirectly driving demand for renewable energy solutions
Nonetheless, the lack of clarity in governance, particularly around AI privacy and data security, poses risks for startups and investors in emerging tech sectors
ECONOMIC SNAPSHOT
AI-Fueled Stock Rally Dealt $1 Trillion Blow by Chinese Upstart (Bloomberg, 5 minute read)
For nearly two years, AI has driven massive gains for US equity markets. The Nasdaq 100 Index surged 92% since early 2023, adding over $14 trillion in value, with AI hype propelling stocks like Nvidia and Meta. However, Chinese AI startup DeepSeek has disrupted this narrative. Its release last week sparked a 3% drop in the Nasdaq 100 on Monday—the largest in six weeks—erasing nearly $1 trillion in market value
Despite the tech selloff, broader markets fared better: the S&P 500 dipped just 1.5%, and the Dow Jones rose 0.7%
As the Federal Reserve prepares to meet, with rates likely to stay steady, and Trump pushes deregulation and tax cuts, the focus remains on whether AI-related valuations can justify massive investments
With the Nasdaq 100 trading at 27x forward earnings (vs. a three-year average of 24x) and Nvidia at 33x, investors are rethinking assumptions of US AI dominance
Biggest Market Loss In History: Nvidia Stock Sheds Nearly $600 Billion As DeepSeek Shakes AI Darling (Forbes, 3 minute read)
Nvidia experienced a historic stock plunge on Monday, losing 17% of its value and erasing $589 billion in market capitalization, marking the largest single-day loss in corporate history. This decline reduced Nvidia’s valuation from $3.5 trillion to $2.9 trillion, knocking it from its position as the world’s most valuable company, now trailing behind Apple and Microsoft
The drop was triggered by concerns over DeepSeek, a Chinese AI company that developed a ChatGPT rival at a fraction of the reported cost of U.S. competitors
Despite Nvidia’s statement that DeepSeek's model is still reliant on their GPUs, the fear of cheaper alternatives to Nvidia’s technology shook investor confidence
Nvidia's CEO, Jensen Huang, saw his net worth drop by $21 billion, from $124.4 billion to $103.1 billion
Americans Are Divided in Their Views of the Economy (Statista, 2 minute read)
Economic frustration was the key factor behind Donald Trump’s return to office in the 2024 election, with 80% of voters prioritizing the economy supporting him. Despite improving economic indicators, public sentiment remains largely negative, with a sharp partisan divide: most Democrats rate the economy as good or excellent, while Republicans overwhelmingly describe it as fair or poor
The economy was the primary issue for voters in the 2024 election, with widespread dissatisfaction driving support for Trump
Partisan perspectives differ significantly: Democrats view the economy more favorably than Republicans, reflecting political polarization in economic sentiment
Trump voters are optimistic about financial improvements in the coming year, while Harris voters hold a more pessimistic outlook
Which industries are most vulnerable to Trump's immigration crackdown? (CBS, 5 minute read)
Immigrants, including undocumented individuals, make significant contributions to the U.S. economy, particularly in sectors like agriculture, construction, and hospitality. Despite their status, undocumented workers create jobs, pay billions in taxes, and help sustain key industries that rely on their labor. Research shows that these workers contribute more to public finances than they take out, often without access to benefits such as Social Security or unemployment insurance
Undocumented immigrants, through entrepreneurship and labor, create jobs for U.S. citizens and residents, with approximately 1.5 million Latino immigrant entrepreneurs employing over 1 million people
Undocumented immigrants paid $96.7 billion in taxes in 2022, contributing $8.9 billion in tax revenue per 1 million undocumented immigrants
Studies show that undocumented immigrants are arrested for violent and drug crimes at less than half the rate of U.S.-born citizens and a quarter the rate for property crimes
Trump promises to disrupt immigration. These charts show how that could shake up the US economy (Yahoo Finance, 6 minute read)
The return of Donald Trump to the presidency has reignited debates about immigration policy and its implications for the U.S. economy. Trump’s pledge to execute large-scale deportations and overhaul immigration programs has raised concerns about labor market disruptions, the fate of highly skilled workers, and the economic contributions of immigrants, both documented and undocumented. Immigrants made up 18.6% of the U.S. workforce in 2023, according to the Economic Policy Institute (EPI). Without immigrants, labor force growth in 2023 would have been just 0.5%
Trump’s mixed signals on the H-1B program, critical for highly skilled workers, create uncertainty for tech companies and other industries reliant on specialized talent
Nearly half of Fortune 500 companies were founded or led by immigrants
Around 530,000 DACA recipients, also known as "Dreamers," contribute $11.7 billion annually to the U.S. economy
Trump’s sweeping agenda injects uncertainty into a healthy economy (CNN, 4 minute read)
As Donald Trump begins his second term, he inherits a robust U.S. economy, with unemployment at a low 4.1%—one of the best starting points for a new president in decades. The economy is characterized by strong job growth, wages outpacing inflation, and steady overall performance. However, challenges such as high living costs and lingering inflation risks persist
Trump has initiated significant actions, including executive orders on energy, immigration, and federal operations while vowing to implement tariffs, deregulation, and tax breaks
Despite frustrations over high prices—households are spending over $1,200 more than in early 2021—wages are rising, helping some Americans catch up
Economists warn that reversing price increases without triggering a recession is unlikely. Instead, Trump’s economic success may depend on continuing the trend of real wage growth that began under President Biden, allowing more Americans to adjust to higher living costs
The market is wrong about US rates under Donald Trump in 2025 (Financial Times, 4 minute read)
The Federal Reserve's December meeting projected a "hawkish" outlook, reducing market expectations for rate cuts in 2025. While markets predict a 0.40 percentage point rate reduction this year, some analysts argue the Fed will raise rates instead, driven by a resilient economy and potentially inflationary policies under President Trump. Indicators such as corporate profits, consumer sentiment, and employment data signal expansion, with no signs of a recession
Inflation is expected to stay within the 2.5–3.5% range, either naturally or with Fed intervention
The Fed aims to avoid a repeat of its delayed inflation response in 2021. Chair Jerome Powell is expected to adopt a hawkish stance, possibly tightening rates by late 2025 if inflation pressures rise
This orthodoxy is likely to persist under Powell's successor, appointed by Trump in 2026, and may pave the way for a future shift in the Fed's inflation target from 2% to 3% by 2030
TRUTH vs. TRUMPONOMICS 2.0
Since his campaign, Donald Trump has made numerous promises and affirmations, many of which are easier said than done or require more steps than simply stating them. In this section, we examine President Trump’s claims and promises, analyzing their feasibility and impact on the economy and the industry
1. Trump threatens 25% tariff on Mexican and Canadian goods
During his campaign last year, President Trump pledged to issue an Executive Order on January 20th to authorize “all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States”, as a response to illegal immigration and drug flow into the United States. While the tariff was scheduled to take effect on February 1st, upon taking office last Monday, Trump instead signed a Memorandum on Trade, instructing officials to review trade and tariff policies to address what he described as “unfair and unbalanced trade.”
An economic model created to project the potential damage of such tariffs determined that they would cause a reduction in the GDP and an increase in inflation, especially making cars, car parts, gas, food, and alcoholic beverages more expensive to the American consumer.
2. Trump says he will ‘demand’ that interest rates come down and has pledged cheaper prices
Since the start of his campaign, President Trump has made a bold promise to reduce inflation. At this year's World Economic Forum in Davos, Switzerland, Trump pledged to lower oil prices, and then, “I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world.”
Trump later explained that reducing energy costs would help lower inflation, which would, in turn, “automatically bring the interest rates down.” When asked if he expects the Fed to listen to him on rates, Trump confidently replied: “Yeah.”
The fact is, it's not that simple. While lowering oil costs, as he demanded in Davos last week, and deregulation could help bring inflation down, other policies may counteract his intended effects on prices. For instance, lowering interest rates and imposing or increasing goods from Mexico, Canada, and China could drive prices up by increasing domestic demand and making it harder for businesses to source inputs from abroad. Similarly, stricter immigration laws and large-scale deportations could impact industries like agriculture, construction, and hospitality, leading to higher wages and rising costs. (TWP, 2024)
3. Trump’s Stargate Project, a $500 billion investment in AI infrastructure
“The largest AI project by far in history.” - Trump
Last Tuesday, President Trump, alongside OpenAI CEO Sam Altman, SoftBank chair Masayoshi Son, and Oracle founder Larry Ellison, announced the formation of Stargate, a new $500 billion American company. Funding would come from the technology arm of the UAE’s sovereign wealth fund. $100 billion was allocated for AI infrastructure in the United States during the first year, “creating 100,000 American jobs almost immediately” by building data centers, boosting electricity capacity, chip production, and other resources as part of an effort to “maximize access to AI" and to prevent capital flow to China. The announcement came just days before DeepSeek, a China AI startup, launched its AI model, shocking the market and disrupting the Artificial Intelligence industry by claiming it can compete with other established models like ChatGPT, at a fraction of the cost.
4. Deportation Dispute Escalates into Trade War: 25% tariff increase to Colombia
Last Sunday, Colombian President Gustavo Petro denied the entry of US military planes carrying Colombian immigrants back into his country arguing that “the United States cannot treat Colombian migrants as criminals” and that he would only take citizens back with dignity and in civilian planes. President Trump responded by imposing 25% tariffs on all Colombian goods coming into the U.S., which would go up to 50% in one week; President Petro retaliated with a respective 25% increase on US products. Washington’s tariff measures are now on hold due to a reached agreement and Colombia is now accepting deportation flights back into the country.
“The Government of Colombia has agreed to all of President Trump’s terms, including the unrestricted acceptance of all illegal aliens from Colombia returned from the United States, including on U.S. military aircraft, without limitation or delay… Today’s events make clear to the world that America is respected again. President Trump …expects all other nations of the world to fully cooperate in accepting the deportation of their citizens illegally present in the United States," a White House statement said.
IMPACT & CLIMATE RESILIENCE
Trump Targets Climate Tech on Day One (Inc, 3 minute read)
President Donald Trump wasted no time implementing his energy agenda, signing a series of executive orders on Inauguration Day that could reshape the U.S. energy landscape. These orders emphasized support for fossil fuels while sidelining renewable energy sources like wind and solar. Among the most significant actions was Trump’s announcement to withdraw the U.S. from the Paris climate agreement, effectively removing the nation from global climate negotiations
Trump also declared an “energy emergency,” promoting fossil fuels and rare earth mineral production but notably omitting solar and wind energy
Additionally, offshore wind projects suffered a blow with an order temporarily halting new leases for wind generation on federal lands, while oil, gas, and mineral leasing remained unaffected
Another order aimed to eliminate the so-called “electric vehicle mandate,” a policy that doesn’t exist but signals a push to weaken emissions
Target is the latest company to roll back some DEI programs (CNN, 3 minute read)
Target is scaling back its diversity, equity, and inclusion initiatives, joining other companies under pressure from right-wing activists, lawsuits, and political shifts. The company announced it will end its three-year DEI goals set in 2020, which included increasing Black representation by 20% and promoting equitable career advancement. Target will also stop participating in external diversity surveys, including one by the Human Rights Campaign, and restructure its supplier diversity team
Despite these changes, Target says it remains committed to inclusion, serving millions of customers daily, and supporting employees' growth
The rollback follows a broader trend, with companies like Amazon, Walmart, and McDonald’s reducing DEI initiatives
According to LinkedIn, chief diversity officer roles grew by 168.9% between 2019 and 2022, but many of these roles are now being cu
IPO & EXITS
Venture Global closes below IPO price in disappointing debut despite Trump’s support of LNG industry (CNBC, 3 minute read)
Venture Global, the second-largest U.S. liquefied natural gas (LNG) exporter, faced a challenging debut in the public market, with shares falling 4% on its first day of trading. Opening at $24.05, below the IPO price of $25, the company closed the day with a market capitalization of $58 billion. The IPO, initially targeting a valuation as high as $110 billion with a share range of $40–$46, was significantly scaled back
Despite these hurdles, Venture’s IPO remains the largest for an oil and gas company in a decade and the fourth-largest since 2000
The company is advancing the development of five LNG facilities along the Gulf of Mexico, aiming for peak production capacity of 143.8 million tonnes annually
President Donald Trump’s declaration of a national energy emergency last Monday, reversing a Biden-era pause on new LNG export projects, underscores his administration's support for growing LNG exports
M&A Activity Involving VC-Backed Startups Picked Up In 2024 (Crunchbase, 3 minute read)
The VC market showed signs of recovery in 2024, with M&A activity picking up after a slow 2023. According to Crunchbase data, the number of M&A deals involving VC-backed startups rose by 7% from 2023, with a total of 1,975 deals, slightly above the 1,842 deals the previous year and nearly identical to the 2020 total of 1,974. The fourth quarter of 2024 was particularly strong, with 537 deals — a 46% increase from Q4 2023 and a 9% rise from Q3 2024
Notable transactions included Gallagher's $13.5 billion acquisition of Assured Partners and BlackRock’s $12 billion purchase of HPS Investment
The U.S. market outpaced the global M&A recovery, with 1,032 domestic deals in 2024, a 30% increase from the 856 in 2023
Q4 2024 alone saw 289 deals, marking a 56% rise from the 185 deals in Q4 2023 AI played a key role, with 268 VC-backed AI startups acquired in 2024, a 39% jump from 2023
AI8 VENTURES HIGHLIGHT
Trumponomics 2.0
Following President-elect Donald J. Trump’s victory over Kamala Harris, the financial world witnessed an immediate response. In just one week, the S&P 500’s value surged by $1.9 trillion, pushing stocks to record highs. The U.S. dollar strengthened globally and Bitcoin achieved unprecedented highs.
Wall Street is preparing for more government spending, lighter regulation, bigger deficits, and accelerating growth under a Trump administration and a Republican-led Congress.
Biden’s Economic Legacy
The Biden era was marked by headlines of massive layoffs and a cost of living crisis. The average worker faced double-digit increases in food, energy, housing, and other essential expenses that impacted middle-class families the most and consumed the bulk of household budgets. Despite record highs in the stock market, nearly half of Americans believed the nation was in a recession. Is this Biden’s fault? No. Global supply chain disruptions, stimulus checks, the aftermath of COVID-19 lockdowns, and the ripple effects of geopolitical tensions all contributed to soaring prices. Did Americans blame Biden? Election results suggest they did. Two-thirds of voters believed the economy was on the wrong track.
Hence, Trumponomics 2.0.
Trump’s campaign capitalized on promises of economic revival, pledging to deliver low taxes, low regulations, low energy costs, low interest rates, and low inflation -Trumponomics.
Alpha Insights on Trump and AI in Mexico City
Last week, we hosted our first Alpha Insights event in Mexico City, where we brought together industry experts, investors, and entrepreneurs to discuss the evolving landscape under the new U.S. administration. We dove into how the election of Donald Trump, "Trumponomics," and the transformative role of AI are shaping the future of investments, regulations, markets, taxes, and cross-border opportunities.
Missed the event? We’ve curated the key insights in our Alpha Insights Special Edition: Trumponomics Report. Understand everything VC-related that happened in 2024 and how profit will shift under Trump 2.0
(Trumponomics 2.0 Special Edition starts on page 22)
Alpha Insights: 2024 Venture Capital Report
Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2024 Venture Capital Report.
Last year, Michael Burry, the legendary fund manager who famously profited from shorting the US housing market in 2008, bet more than $1.6 billion on a Wall Street crash by shorting the S&P 500 and Nasdaq-100. Nothing happened.
This year, Warren Buffett’s cash reserves reached a record $276.9 billion as Berkshire Hathaway trimmed its stock holdings in Apple. Some view it as a routine adjustment, while others speculate that Buffett perceives an overheated, overvalued market.
Everyone talks about a soft landing, but warning signs are flashing and the world seems to be teetering on a delicate balance. Is there something we’re missing? Is there an unseen factor at play?
Alpha Impact 8 Ventures is disrupting the industry, generating wealth, creating technology, providing access, leveling the play field, reducing systemic barriers, and building a resilient world.
Become part of the our revolution.
Happy reading,
AI8 Ventures’ Research & Investment Team
